Outpatient Substance-Abuse Residents Claim They're Rent Stabilized

Landlord leased a section of its SRO hotel to a counseling center that operated an outpatient substance-abuse program. The counseling center, in turn, rented 89 rooms to participants under transitional residency agreements. The residents were allowed to stay only six to nine months, and had to follow house rules and attend a substance-abuse treatment program. Residents claimed that landlord and the counseling center created illusory tenancies, and that both profited. Landlord collected six times the legal rent-stabilized rents from the center, and the center collected rent payments directly from NYC HRA. Residents also claimed that landlord unlawfully harassed them, that the center violated the Mental Hygiene Law by forcing them to participate in the treatment program, that some were unlawfully evicted without legal process, and that the residency agreement violated public policy. The court dismissed the case without a trial, finding no cause of action. Residents appealed, and the case was reopened. Residents presented a valid controversy and were entitled to have the court determine whether they were permanent hotel tenants subject to rent stabilization, whether there was an illusory tenancy between landlord and the counseling center, whether the center violated the Mental Hygiene Law, and whether the residency agreements were void as a matter of public policy. 

DiGiorgio v. 1109-1113 Manhattan Avenue Partners LLC: NY Slip Op 00172, NYLJ No. 1202584997406 (App. Div. 2 Dept.; 1/16/13; Skelos, JP, Balkin, Chambers, Miller, JJ)